Question: Extensive Enterprise Inc. has to choose between two mutually exclusive projects. If it chooses project A, Extensive Enterprise Inc. will have the opportunity to make

Extensive Enterprise Inc. has to choose between two mutually exclusive projects. If it chooses project A, Extensive Enterprise Inc. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 14%? Cash Flow Project B Project A Year 0: -$12,500 Year 0: Year 1: 8,000 Year 1: -$45,000 10,000 17,000 Year 2: 14,000 Year 2: Year 3: 13,000 Year 3: 16,000 Year 4: 15,000 Year 5: 14,000 Year 6: 13,000 O $9,682 O $11,756 O $13,831 O $12,448 O $15,214
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